PT. Serendipity is a company that produces shoes and currently applies a cash-only salespolicy. In this new year's holiday season, the company is considering changing its cash-onlysales policy to a net 45-day credit. The new credit policy is expected to increase sales from1200 units per month to 1350 units per month. The current selling price per unit and variablecost per unit are IDR 175.000 and IDR 100.000, respectively. However, if the product is soldon credit, the selling price per unit and the variable cost per unit will remain constant. Therequired return is 3% per month.Based on the above information, calculate the NPV of the new credit policy! Should PT.Serendipity change its sales policy?

NPV is difference between the present value of future cash flow and initial investment.

Serendipity is a company that produces shoes and currently applies a cy. In this new year's holiday season, the company is considering changir s policy to a net 45-day credit. The new credit policy is expected to iner ) units per month to 1350 units per month. The current selling price per u per unit are IDR 175.000 and IDR 100.000, respectively. However, if the credit, the selling price per unit and the variable cost per unit will remai ired return is 3% per month.

Serendipity is a company that produces shoes and currently applies a cy. In this new year's holiday season, the company is considering changir s policy to a net 45-day credit. The new credit policy is expected to iner ) units per month to 1350 units per month. The current selling price per u per unit are IDR 175.000 and IDR 100.000, respectively. However, if the credit, the selling price per unit and the variable cost per unit will remai ired return is 3% per month.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Equate Inc. sells products with a cost of $25,000 during the year to customer for $55,000. It is Equate’s policy to accept returns up to 60 days after the date of purchase. Equate estimates that there is a 60% probability that returns will be 3% of sales and a 40% probability that returns will be 2.5% of sales. What is the transaction price under a) expected value method b) most likely amount method? Choices: A: $53,460 B: $53,350 A: $53,350 B: $53,460 A: $53,460 B: $54,450 A: $54,450 B: $53,460 A: $53,350 B: $53,350
Larkspur Inc. sells prepaid telephone cards to customers. Larkspur then pays the telecommunications company, TeleExpress, for the actual use of its telephone lines related to the prepaid telephone cards. Assume that Larkspur sells $5,700 of prepaid cards in January 2020. It then pays TeleExpress based on usage, which turns out to be 50% in February, 30% in March, and 20% in April. The total payment by Larkspur for TeleExpress lines over the three months is $2,100. Indicate how much income Larkspur should recognize in January, February, March, and April under IFRS. (Do not leave any answer field blank. Enter O for amounts.) Month Income January $ February $ March 2$ April 2$
DG Company is the exclusive importer of spare parts of automobile products in Ghana. The parts sell for GHS40 per unit and has variable cost of GHS28 per unit. The company’s fixed expenses are GHS180,000 per year. The company plans to sell 16,000 units of the product in 2016. Required: (i) What is the break-even point in units and Ghana cedis? (ii) What sales level in units and in sales value is required to earn an annual profit of GHS60,000? (iii) Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by GHS4 per unit. What is the company’s new break-even point in units and sales value? (iv) Explain the effects of the changes in variable expenses on the break-even of the company.
Gelmite & Sons Hardware is considering introducing a cash discount policy to its customers so as toimprove current sales. There are three possible scenarios that include monthly estimates. Gelmite& Sons uses a 60% mark up on cost on all their products as a general rule. Fixed costs are R8 000per month. Scenario A: Representing the Current ScenarioCompany sold 600 units of the spark nail which they ordered at a wholesaler in Shoppers Town fora cost price of R100 each. Scenario B: Representing initial sales target Company will sell 800 units of the spark nail which they ordered at a wholesaler in Shoppers Townfor a cost price of R100 each.These sales units are achieved after the introduction of a 20% markdown on the original sellingprice.Scenario C: Representing a scenario where sales targets are surpassed Company will sell 1 000 units of the spark nail which they ordered at a wholesaler in Shoppers Townfor a cost price of R100 each. In order to achieve the increased sales,…
Saucier & Co. currently sells 1,400 units a month for total monthly sales of $98,500. The company is considering replacing its current cash only credit policy with a net 30 policy. The variable cost per unit is $18 and the monthly interest rate is 1.1 percent. What is the switch break-even level of sales? Assume the selling price per unit and the variable costs per unit remain constant. A. 1,743 units B. 1,467 units C. 1,421 units D. 1,406 units E. 1,548 units
ABC Office Furniture sells its primary product, an office chair, at R150 per unit. Total credit sales for the previous financial year were 4 000 units. The variable cost to manufacture one chair is R60 and the total fixed costs for the year are R80 000. The entity’s credit terms are 2/10 net 45 and it is considering tightening its credit standards to 3/7 net 30. This is expected to result in a 5% decrease in sales, but bad debt is expected to decrease from 2% of credit sales to 1%. The average collection period is expected to decrease from the current 45 days to 30 days. In the past, 20% of debtors accepted the discount. This percentage is not expected to change. The entity’s cost of capital is 14%. Assume 365 days per year. To calculate the effect of the tightening of credit standards, the entity needs to calculate the following: ■ the profit loss or gain from a decrease or an increase in sales ■ the cost of the marginal investment in accounts receivable ■ the cost of marginal bad…
Determine the monthly break-even in total dollar sales.
Please help
Ayayai Inc. sells prepaid telephone cards to customers. Ayayai then pays the telecommunications company, TeleExpress, for the actual use of its telephone lines related to the prepaid telephone cards. Assume that Ayayai sells $4,100 of prepaid cards in January 2020. It then pays TeleExpress based on usage, which turns out to be 55% in February, 25% in March, and 20% in April. The total payment by Ayayai for TeleExpress lines over the 3 months is $3,000.Indicate how much income Ayayai should recognize in January, February, March, and April. (If answer is 0, please enter 0. Do not leave any fields blank.) January income February income March income April income
Regency Rug Repair Company is trying to decide whether it should relax its credit standards. The firm repairs 72,000 rugs per year at an average price of $32 each. Bad-debt expenses are 1% of sales, the average collection period is 40 days, and the variable cost per unit is $28. Regency expects that if it does relax its credit standards, the average collection period will increase to 48 days and that bad debts will increase to 1.5% of sales. Sales will increase by 4,000 repairs per year. If the firm has a required rate of return on equal-risk investments of 14%, what recommendation would you give the firm? Use your analysis to justify your answer. (Note: Use a 365-day year.)
Levi Strauss has some of its jeans stone - washed under a contract with independent U.S. Garment Corp. If U.S. Garment's operating cost per machine is $22,000 for year 1 and then it increases by 8% per year through year 10, what is the equivalent uniform annual cost per machine (years 1-10) at an interest rate of 10% per year? The correct answer to this problem is $30, 012, but i need help working out the steps to get there.
EFU Group is considering changing its credit period from “net 45" (which has resulted in 8 A/R "Turns" per year) to "net 60" (which is expected to result in 6 A/R “Turns" per year). EFU Group is currently producing a single product with variable costs of $150 and a selling price of $180. Additional annual credit sales of $180,000 from new customers are forecasted, in addition to the current $1.5 million in annual credit sales. The before-tax opportunity cost for each dollar of funds "tied-up" in additional receivables is 30%. Ignoring any additional bad-debt losses that may arise, should EFU Group relax their credit period?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS